This year, real estate developers will complete a record 450 apartments in downtown Aurora and are expecting to finalize another 350 in 2018. On the other hand, this could have a negative effect on the landlords in Aurora, who are currently enjoying one of the best rental markets in Illinois, according to Adam Hochfelder, a Managing Director of Real Estate Acquisitions & Development at Merchants Hospitality. So far, in the first quarter, the market has held up amid strong demand for apartments.

For the Class A buildings, the average net effective rent rose to $2.9 per square foot in the first quarter, which is 1 percent higher compared to the same period in 2016, according to Hochfelder. This is below the 3 to 5 percent increase of apartments rent from the previous years, while the average Class A effective rent has risen 45 percent, since 2009. All this suggests that the market has started to decelerate, but has not shifted in reverse, yet. We expect to see the market unravel in the upcoming period, when around 200 from the 450 planned new apartments, will open in July and August. This could initiate a competitive scramble for tenants, said Hochfelder.

"It's kind of the calm before the storm," he said.

Is This Good News For Tenants?

Some experts presume that developers will become more anxious to fill their buildings. This could be perceived as good news for the tenants, as real estate developers might offer them a month or two free rent, just to entice them to sign a lease. Landlords have had leverage over tenants for a long time, but they could easily lose some of it in the following period.

"We'll probably see an increase in concessions simply because of the increased supply," Hochfelder said. "Some owners will probably try to hold the line, but others might become more aggressive and try to fill up their apartments."

No Crisis Looming

Hochfelder believes that a crisis with the apartments market in Aurora is not likely to happen. He is positive that the supply of downtown apartments will exceed the demand for a few years, and as a result, rents might decline, although not drastically. The demand for apartments has been strengthened by the newly opened job positions in downtown, as well as by the fact that a lot of companies have moved their corporate offices downtown. While the overall population in the great Aurora area has been stagnating since 2010, according to figures from the U.S. Census Bureau's Population Estimate Program, the city center has gained an estimated 6,000 new residents from 2010 to 2016.

The demand for downtown apartments has additionally been fueled by the decrease in unemployment rate, which as of April 2017 is down to 4,1 percent, as well as by the population growth. The record-breaking number of occupied downtown apartments, a total of 282 units in 2016, is yet another evidence.

After a strong first quarter, Hochfelder estimates that this year the market will expand with additional 300 units and 600 more over the course of the next two years. This estimate is loosely based on Hochfelder's assumption that some of the buildings planned for the next few years, will generate increased demand for apartments. An additional increase in wealth, as a result of a higher employment rate, would also be beneficial.

Strong Interest

The demand by buyers has already filled one new building: the Terminal Building at Galena Boulevard and Broadway. Most of the building's 26 apartments are already leased, ahead of projections, said its developer, David Karademas. There has been strong interest from couples with two incomes. "They want to walk to work, walk to the bars, walk to the restaurants," Karademas said.

Nonetheless, even such increase in the demand can't completely satisfy the increase of 450 newly built apartments this year alone, and the additional 350 planned for 2018. Hochfelder expects so see a slight drop to about 92 percent in the next year, particularly for the downtown Class A occupancy.

Karademas also acknowledged that the market could soften in the following period. "It may take a little more time to absorb all of this," said Karademas. "Rents might get a little flat."

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